Recently vortex coalescence was reported in superconducting Sr2RuO4 by several experimental groups for fields applied along the c axis. We argue that Sr2RuO4 is a type-1.5 superconductor with long-range attractive, short-range repulsive intervortex interaction. The type-1.5 behavior stems from an interplay of the two orbital degrees of freedom describing this chiral superconductor together with the multiband nature of the superconductivity. These multiple degrees of freedom give rise to multiple coherence lengths, some larger and some smaller than the magnetic field penetration length, resulting in nonmonotonic intervortex forces.